Bipartisan team pushes housing bill

'If Congress ever wants to deal with this, we have to do it fairly soon,' Corker says. | AP Photo

Under the Corker-Warner plan, a new agency named the Federal Mortgage Insurance Corp. would replace the Federal Housing Finance Agency as Fannie and Freddie’s regulator one year after the bill is signed into law. The FMIC would also take over for Fannie and Freddie by backing select mortgage bonds issued by approved firms in five years. Private investors would be required to cover the first 10 percent in losses on the securities, which can be caused by future defaults or refinancings when interest rates fall.

This buffer is double the worst losses Fannie and Freddie had to cover since 2007 and would have prevented taxpayer bailouts that followed the housing crisis, according to Corker’s and Warner’s offices.

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The bill would also begin the gradual reduction of the size of loans Fannie and Freddie can guarantee as they’re being wound down “to get the government out of the business of guaranteeing millionaires’ homes.”

While the bill would abolish the affordable housing goals of the mortgage giants, it would set up a fund to support rental housing, homeowner counseling and state grants funded by companies that issue bonds the FMIC would back.

Eight years after the bill is signed into law, the Government Accountability Office would issue a study on whether the market could function without the FMIC, and Congress could consider ways to wind down the new agency.

A chorus of outside housing groups and economists said the legislation was a good first step toward protecting taxpayers and ensuring a wide availability of financing for home loans. They were cautious, however, about endorsing the whole package, and most of their comments focused on applauding the effort.

“There is much work yet to be done, but this bill is a strong foundation on which to begin the process,” said the American Bankers Association CEO Frank Keating.